CANADA FX DEBT-C$ ends flat; China easing offset by Fed comments

Reuters Staff

4 Min Read

* C$ ends at C$1.0279 vs US$, or 97.29 U.S. cents
* China rate cut supports growth currencies
* Stimulus hopes hurt by Fed comments
* Bond prices mostly lower
By Allison Martell
TORONTO, June 7 (Reuters) - The Canadian dollar closed flat
against its U.S. counterpart on Thursday, as a boost from
China's surprise interest rate cut was offset by comments from
U.S. Federal Reserve Chairman Ben Bernanke that suggested more
monetary stimulus is not imminent.
Bernanke, testifying before Congress, said the Fed was ready
to shield the U.S. economy if financial problems mounted, but
disappointed investors hungry for signals that the U.S. central
bank would conduct a third round of bond buying.
The comments came one day after the European Central Bank
put the onus on euro zone governments to solve the bloc's debt
crisis.
"The markets were looking for a little more out of the ECB
and out of Bernanke as well, so there's a little bit of
disappointment," said David Bradley, a director of foreign
exchange trading at Scotiabank.
The Canadian dollar closed at C$1.0279 against the
U.S. currency, or 97.29 U.S. cents, the same as Wednesday's
close.
Early on Thursday, China's rate cut to shore up its flagging
economy boosted global stocks and lifted growth-linked
currencies in Canada, New Zealand and Australia. The Australian
dollar hit a three-week high, while the Canadian dollar
climbed as high as to C$1.0210 against the greenback.
Hopes of more U.S. monetary stimulus were further dashed by
positive U.S. data on Thursday that showed the number of
Americans lining up for new jobless benefits fell last week for
the first time since April.
There was some upbeat news out of Europe, as Spain soothed
fears that it is being cut off from financial markets by raising
more than 2 billion euros ($2.5 billion) at a bond auction,
although it had to pay dearly.
Speculation that Spain could become the fourth euro zone
country to need an international bailout prompted investors to
sell the euro heavily last week, although European sources have
said Germany and European Union officials are urgently exploring
ways to support Spain's stricken banks.
"Every central bank in the world is acknowledging the fact
that their policy is currently being dictated by what's going on
in Europe," said Chris Applin, senior dealer at Canadian Forex
in London.
Since data last week showed weak U.S. job creation in May,
there has been rising speculation of more stimulus measures from
global central banks.
The Bank of Canada joined the ECB in holding rates on
Tuesday, but the tone of its statement signaled that its next
move would be a rate hike.
The market expects that the Canadian May employment figures
due out on Friday will not match the outsized job gains in the
previous two months, which averaged almost 72,000 a month. The
median forecast in a Reuters survey of economists is for a gain
of 10,000.
Canadian bond prices were mostly lower. The two-year bond
fell 2 Canadian cents to yield 1.061 percent, while
the benchmark 10-year bond fell 27 Canadian cents to
yield 1.837 percent.